Regulators Appear to Endorse Alternative Credit Scoring
A joint statement from the nation’s biggest banking regulators expressed cautious optimism toward emerging decisioning models that could generate more auto loans.

Kathy Kraninger is director of the Consumer Financial Protection Bureau, which joined four other federal banking regulators in offering a largely positive opinion of alternative credit data in a joint statement this week.
WASHINGTON — The Consumer Financial Protection Bureau and four other federal regulatory agencies released a joint statement offering tempered support for the use of alternative data in credit decisioning processes, including applications for auto loans.
Alternative credit data focuses less on credit history and more on cash flow, measuring activity relating to “nonfinancial” information such as bill and rental payments and bank account balance history. The use of alternative data in “second look” platforms for applicants who fail to qualify under traditional scoring models has grown over the past decade as creditors have sought new ways to reach more borrowers.
Read: Auto Loans and Leases Up 1% in Q3
The CFPB was joined as a signatory by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the National Credit Union Administration.
“Using alternative data may enable consumers to obtain additional products and/or more favorable pricing/terms based on enhanced assessments of repayment capacity,” the statement reads, in part. “These innovations reflect the continuing evolution of automated underwriting and credit score modeling, offering the potential to lower the cost of credit and increase access to credit.”
The alternative model generated 27% more approvals and reduced annual percentage rates by an average of 16%.
The statement follows the August release of a CFPB-commissioned study, undertaken in partnership with Upstart Network, an alternative scoring technology provider, that set out to compare decisioning results from traditional and alternative models.
Analysts found the alternative model generated 27% more approvals and reduced annual percentage rates by an average of 16%; no bias toward any race, ethnicity, or gender was detected.
However, “As with prior developments in the evolution of credit underwriting, including the advent of credit scoring, the use of alternative data and analytical methods also raises questions regarding how to effectively leverage new technological developments that are consistent with applicable consumer protection laws,” the regulators noted, listing unfair, deceptive, or abusive acts or practices standards and the Fair Credit Reporting Act as examples.
More Auto Finance

New Cars a Tad More Affordable
May averages show that combined circumstances gave auto consumers slightly better buying power for the month, though average prices were up year-over-year.
Read More →
First-Quarter Sees Long Auto Loan Growth
Experian data show more consumers are tapping the method, along with refinancings, to afford buying. Meanwhile, subprime borrowers are getting more access.
Read More →
Mastering Credit Friction
In this video, Josh Krach explains how to turn credit friction into an advantage.
Read More →
April Less Affordable
Based on prices, reduced incentives and slower household income growth, consumers found it more challenging to buy new last month, Cox Automotive reported.
Read More →
Auto Lenders, Consumers on a Tightrope
April borrowing data shows that more consumers are bending over backward to buy vehicles, though subprime lending cooled off for the month.
Read More →
Toyota Financial Services President Replaced
Scott Cooke has served in various roles with Toyota Financial Services for over 20 years, including president and CEO, which he retires from on June 30.
Read More →
Permission or Approval: When to Notify Finance Sources
Credit card down payments, multiple vehicle purchases and even straw purchases can be completed without committing bank fraud, as long as you tell the bank first.
Read More →
At-Risk Auto Borrowers Drive Looser Credit Access
Cox Automotive’s index shows the subprime segment, long loan terms, negative-equity borrowers and down payment amounts all grew in February despite ever-higher vehicle prices.
Read More →
Auto Loan Forecast Bucks Market Trend
Auto loan originations rose over 6% year-over-year in the third quarter of 2025, but TransUnion predicts a slight decline in auto loan growth this year, making it an outlier in the company's overall lending forecast.
Read More →
Auto Credit More Plentiful
Growing access shows greater lender appetite for risk as consumers take on heavier debt burden in an inflated market.
Read More →